I am the director of a nonprofit and want to rent an area of my home to the organization. Is this illegal?
If your nonprofit is a private foundation, this is a prohibited self-dealing transaction for which you will be liable for an excise tax based on the rental value. If you don't give the money back, you can be taxed at 200% of the value. (See Ready Reference Page: "Private Foundations Must Avoid Self-Dealing.") If your nonprofit is a public charity, you need to consider the arrangement under the rules for excess benefit tax transactions and will want to be sure that a disinterested committee checks comparable rental situations and determines that it is a fair rental rate. (See Ready Reference Page: "Charities Must Avoid Excess Benefit Transactions.")
We have a nonprofit 501(c)(3) working with clients who suffer from addiction. We have a residential treatment and step down sober living homes. Our board president has a home we could rent from him to expand the number of beds for increase of beds available. Can we rent from the board president without it being a conflict? I have read so many articles on conflict of interest but none quite answer this question.
It is clearly a conflict of interest, but that doesn't mean it would be illegal. Assuming that your organization is a public charity, go through the safe harbor procedures to be sure that the rental is reasonable and not an excess benefit. —Don Kramer